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Corus: Tata, CSN battle to be settled by auction 
London, January 27
With no final offers forthcoming from Tata Steel and CSN — the two suitors for Corus — the UK Takeover Panel has decided to put the Anglo-Dutch steel maker under the hammer on January 30.

Export growth slows down in December
New Delhi, January 27
The growth rate of India's exports witnessed a slowdown in December with merchandise shipments showing an increase of just 19.5 per cent to $9.9 billion in December.

Aviation Notes
Revolver on board — Who is responsible?
by K.R. Wadhwaney

All individuals from Nusli Wadia to domestic help to x-ray machine in charge to Air-India security personnel and counter-supervisor are guilty la affaire for the detection of a revolver and live cartridges in check-in baggage from Mumbai-initiated flight to Dubai on January 13.

‘Rising Indian economy not to hit Asean’
Davos, January 27
Rising economies of India and China will not have an adverse impact on the Asean but will only help the member countries of the South-East Asian trading bloc, Minister of State for Industry Ashwani Kumar has said.
The Deputy Chairman of the Planning Commission, Dr Montek S. Ahluwalia, listens during the session "The Global Economic Outlook 2007" at the World Economic Forum in Davos on Saturday.
The Deputy Chairman of the Planning Commission, Dr Montek S. Ahluwalia, listens during the session "The Global Economic Outlook 2007" at the World Economic Forum in Davos on Saturday. Failure to complete the World Trade Organisation's Doha round of trade talks would jeopardise the world economy, European Central Bank chief Jean Claude Trichet said on Saturday. "The first danger will be not to succeed in the present round of trade negotiations," Mr Trichet said in a debate on global economic prospects at the WEF's annual meeting. — AFP photo

 

 

A model displays a creation by Japanese designer Junya Watanabe as part of mens' Autumn-Winter 2007-2008 ready-to-wear collection in Paris on Saturday.
A model displays a creation by Japanese designer Junya Watanabe as part of mens' Autumn-Winter 2007-2008 ready-to-wear collection in Paris on Saturday. —AFP

EARLIER STORIES

 

Investor Guidance
STCL can’t be deducted from income
by A.N. Shanbhag

Q. Due to the volatile nature of the market, I have incurred some short-term capital losses (STCL). Can I set off the same against my normal income and pay tax only on the net balance? If not, what is the way out?

 

 

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Corus: Tata, CSN battle to be settled by auction 

London, January 27
With no final offers forthcoming from Tata Steel and CSN — the two suitors for Corus — the UK Takeover Panel has decided to put the Anglo-Dutch steel maker under the hammer on January 30.

The nine-round auction, which could see Corus' valuation shoot up to $11 billion, will start at 1630 hrs (2200 hrs IST) on January 30 and be completed latest by 0300 hrs (0830 hrs IST) on February 1.

However, a winner could emerge before February 1 if the auction does not last the planned nine rounds.

"Neither offeror has declared its offer final, such that either offer may be increased or otherwise revised, a competitive situation continues to exist for the purposes of Rule 32.5 of the Takeover Code," the Takeover Panel said in a filing on the London Stock Exchange.

Brazil's CSN has bid 515 pence a share against Tata Steel's 500 pence a share, but the Indian conglomerate has not said that its currently lower offer is final. Hence, the need for auction.

Of the maximum of nine rounds, eight rounds would be for the suitors to table a fixed price bid in cash. But in the event of the competitive situation continuing, a final round would be held to give chance to the offerors to outbid the other within a ceiling that has already been informed to the Panel.

As per information given to the Tatas and CSN by the Takeover Panel, there has to be a difference of at least five pence for each round of the bid between the two suitors.

Officials of the Takeover Panel have held talks with both Tata Steel and Companhia Siderurgica Nacional (CSN) to reach a formula to settle the takeover. Tata Steel is expected to raise its current 500 pence a share offer for Corus above CSN's 515p bid.

The condition that each bid in each of the nine rounds has to be five pence more than the other could mean that Corus shareholders could get even 600 pence a share if the fight between the two suitors lasts till the ninth round. "All parties have agreed to the process," Takeover Panel's notice on the LSE said. — PTI

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CSN confident of winning 

Ahead of open bidding for Corus Group, Brazil's CSN today exuded confidence saying it was determined to acquire the Anglo-Dutch steel maker.

"We are determined to acquire Corus. And given the synergies afforded to us by our ability to supply low-cost ore to Corus, we enter the process with confidence," a spokesman of CSN said. It was the Brazilian firm's counter offer of 515 pence to a revised bid of 500 pence by Tatas that prompted the UK Takeover Panel to step in.

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Export growth slows down in December
Tribune News Service

New Delhi, January 27
The growth rate of India's exports witnessed a slowdown in December with merchandise shipments showing an increase of just 19.5 per cent to $9.9 billion in December.

Despite a mild slowdown in December, overall increase in exports in the first nine months of this fiscal was 36.2 per cent at $89.4 billion, according to official figures released today.

The rate of increase in imports was even higher at 41.8 per cent to $15.5 billion. Imports during April-December were up 36.30 per cent to $131.2 billion.

With imports increasing faster than exports, the trade deficit in the first three quarters of 2006-07 has increased to $41.7 billion as against $30.5 billion in the same period last year.

The non-oil imports, which generally include the capital equipment and other economic activity generating inputs, were up 31 per cent to $10.1 billion in December.

Oil imports in December increased 29.5 per cent to $4.8 billion.

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Aviation Notes
Revolver on board — Who is responsible?
by K.R. Wadhwaney

All individuals from Nusli Wadia to domestic help to x-ray machine in charge to Air-India security personnel and counter-supervisor are guilty la affaire for the detection of a revolver and live cartridges in check-in baggage from Mumbai-initiated flight to Dubai on January 13.

Regardless of Wadia’s impeccable reputation and high industrialistic status, can he be absolved for his failure to keep the gun under his safe custody?

While placing baggage in a suitcase, as instructed, the domestic help must have examined the ‘old bag’ if it, among other things, contained/essential articles like a shaving kit. If he did notice revolver in the bag, did he inform his boss? If he did not, how could he be left unpunished?

Was the suitcase placed for x-ray? According to airport sources, it was not placed on the machine and after obtaining ‘security ribbon’, it was placed on the counter for loading. If this is true, why should an x-ray in charge be suspended and other officials of security and Air-India go scot-free?

When the revolver was detected from the Air-India’s scheduled flight in the checked-in baggage, Mr Wadia immediately contacted a senior official in the PMO (Prime Minister’s Office). Air-India officials were also provided details about the revolver. Despite high political contacts, Wadia was still questioned and detained for sometime before he was allowed to leave the airport.

The sensational incident took place on January 13. But the AI officialdom did not reveal the details for 5-6 days as to how undeclared fire-arm could go undetected from the Mumbai airport? Was the x-ray machine faulty? If not, how could revolver and cartridges go undetected? The Bureau of Civil Aviation Security and the Aviation Ministry owe a detailed explanation for such a big lapse.

The clarifications from Mr Wadia and the Civil Aviation Ministry are also essential because in preliminary reports appearing on January 20, 2007, there are many inaccuracies. One report said that Wadia showed the revolver licence to the Dubai immigration authorities. Another news item said Mr Wadia called up his family members and the licence was faxed. The third report hummed another version saying that the licence documents were sent by the next flight. This should have taken hours. Was Wadia detained until then?

The Dubai immigration authorities are generally very sensitive. They react sharply for any violation from an Indian. In 1982, before Sharjah cricketers’ benefit matches began, Dillip Vengsarkar protested against discrimination. He was deported while the team entered Sharjah for the benefit of a small quantum of foreign currency.

For the past 8-10 months, Air-India has received nothing, but negative publicity from liquor smuggling from aircraft to molestation allegations against senior officials. Non-detention of a fire-arm on board the flight shows how functioning of the national carrier at Mumbai airport is so lax. It is time the CMD V. Thulasidas inculcate a sense of discipline among staff members before he returns to the ministry in another few months.

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‘Rising Indian economy not to hit Asean’

Davos, January 27
Rising economies of India and China will not have an adverse impact on the Asean but will only help the member countries of the South-East Asian trading bloc, Minister of State for Industry Ashwani Kumar has said.

"India's strengthened presence in the global economy would boost the country's imports, which can increasingly come from the Asean nations," Mr Kumar said at a session on Regional Agenda — Asia, at the World Economic Forum meeting here.

With the prestigious WEF annual meeting adopting the theme of 'Shifting power equation', the focus has turned towards Asia, particularly on India and China.

However, questions have also been raised on whether the two most populous countries of the world would grow at the cost of others. "In fact, as a result of high growth leading to increase in wages, some of the production bases could shift to the Asean economies," he said.

In another session, he said India had liberalised its mining policy and opened the sector to foreign and domestic private investment. India produces 84 minerals and is self-sufficient in 35. — PTI 

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Investor Guidance
STCL can’t be deducted from income
by A.N. Shanbhag

Q. Due to the volatile nature of the market, I have incurred some short-term capital losses (STCL). Can I set off the same against my normal income and pay tax only on the net balance? If not, what is the way out?

— Iffat

A. Short-term capital loss (STCL) cannot be subtracted from your normal income. It has to be set-off against other short-term capital gain or taxable long-term capital gain income only. If there is no other capital gain income in the financial year (note that long-term capital gains on equity and equity MFs will not count as the same is not taxable), you may carry forward the loss for set-off in future years. However, take care to file your tax return as carrying forward is not allowed without filing the year’s tax return.

Capital gains tax

Q. I have inherited 4 acres of agricultural land from my father (3 acres through a court decree in 1996 and 1 acre through Will after my father’s death in 1999). My father had inherited this land from my grandfather in 1975, who had purchased this land in 1950s. This land falls within 5 km of the limits of the municipal committee. I, now, intend to sell this land and it is likely to fetch about Rs 16 lakh @ Rs 4 lakh per acre. I want to use this amount for the purchase of a house/ plot or some commercial property in the urban area.

Please let me know the implication of the capital gains tax, if any, in this case. How should I invest this money so that I have not to pay any capital gains tax.

— Baldev Singh

A. Agricultural land situated within 8 km of the local limits of any municipality, notified area committee, town committee or a cantonment board and which has a population of not less than 10,000 is considered as a capital asset. Consequently, sales made of such lands situated within the limits would attract tax as capital gains. [CIT v Shubhlata & Others 13TCR91 (1998)].

Long-term capital gain (LTCG) is to be computed by deducting from the full value of the consideration i) any expenditure incurred in connection with the transfer ii) indexed cost of acquisition and iii) indexed cost of improvement. In the case of assets, acquired prior to 1.4.81, the option of substituting the fair market value (FMV) in place of original cost is open to the investor. In other words, if the actual cost of acquisition is lower than FMV as on 1.4.81, the investor may adopt the FMV to be his cost of acquisition. On the other hand, if the actual cost of acquisition is greater than the FMV as on 1.4.81, the investor may adopt such cost. The CII based on 1981-82 only will be taken into account, whatever be the choice of the investor.

LTCG is taken as a separate block and charged to tax at a flat rate of 20.4 per cent. No deductions are allowed under Chapter-VIA like u/s 80C, 80D etc., for LTCG.

The tax on all long-term capital gains which are chargeable to tax, can be saved by investing within 6 months the amount of capital gains in infrastructure-related Bonds of NHAI or REC u/s 54 EC. The lock-in period is 3 years. The current interest rate is around 5.5 per cent and this is fully taxable. These Bonds are opened and closed on-and-off.

The assessee may claim exemption u/s 54F by purchasing a residential house within 1 year before or 2 years after the date of sale of the old house. Alternatively, he may construct a residential house within 3 years after the date. The entire net sale proceeds (after the related expenses) to be reinvested. In the case of exemption u/s 54F, the assessee should not own more than one house on the date of earning the capital gains. The new house has a lock-in of 3 years. Sale within this period entails the loss of the exemption claimed earlier and the corresponding capital gains is treated as taxable LTCG during the year of sale.

The amount which is not invested before the filing of returns for the year or the statutory last date for filing the returns, whichever is earlier, is required to be parked in ‘Capital Gains Account Scheme’ with a bank in India.

The indexed cost is computed by multiplying the cost of acquisition with the ratio of the Cost Inflation Index of the year of sale by that of the year of acquisition.

For computing long-term capital gains arising out of the subsequent sale by the donee or the legatee, the cost of the property is the cost incurred by the donor when he originally acquired it, or the FMV as on 1.4.81 as assessed by an official chartered valuer, whichever is higher. Explanation ‘iii’ to Sec. 48, defines ‘indexed cost of acquisition to mean an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later’.

This means that in the case of an inherited or gifted property, the cost of acquisition is the cost to the original holder (or FMV as on 1.4.81) but the date of acquisition for indexing should be taken as the date of the inheritance or the gift. However, the character of long or short-term depends upon the date of acquisition of the original holder. In case this original holder has also acquired the property by way of gift or inheritance then it will be the date of very first holder who purchased or constructed the property.

You can save the tax only by purchasing a residential house and not a land or commercial property.

NRO account

Q. I am an NRI for the past many years. I earn agricultural income in India of around Rs. 75,000 per annum. I understand agricultural income is not taxable in India. In any case, since the income is lying idle in the bank, I would like to invest the same in say mutual funds.

1. What is the ideal type of account for this type of needs, with less or no tax implications?

2. Will I attract tax if I move all of my current funds (around 8 lakh) as a single deposit into this proposed new account? Would I have to split this amount into several smaller deposits to avoid tax? This is all agricultural income. Does agricultural income attract tax?

— Ramesh

A. Agricultural income is tax-free in India. This income being non-repatriable, should get credited to your NRO account. NRIs are not allowed to have normal Resident accounts. After becoming an NRI, the account holder is expected to get his Resident accounts redesignated as NRO. You are permitted to have a joint account with any Resident as a second or third holder.

Opening multiple accounts will not solve the problem. You will have to be prepared to answer a query by the Department, if raised.

Note that interest on NRO suffers from TDS and this amount can be reclaimed, if due, by filing tax returns.

The authors may be contacted at wonderlandconsultants@yahoo.com

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BRIEFLY

Ranbaxy gets relief in lipitor case
Mumbai, January 27
Ranbaxy Laboratories has secured a favourable verdict from Canada's Federal Court in the 'Lipitor' case against global drug maker Pfizer. The Federal Court of Canada has found Pfizer's Canadian 'atorvastatin' patent CA 2,021,546 as invalid, Ranbaxy informed the BSE. Atorvastatin is a cholesterol-lowering drug which is marketed by Pfizer under the brand Lipitor. "We are pleased with this decision as it stands, as it allows the entry of Ranbaxy's generic atorvastatin in Canada upon marketing approval," Ranbaxy Senior Vice-President, Global Intellectual Property, Mr Jay Deshmukh said.— PTI

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